Learning, hubris and corporate serial acquisitions

Recent empirical research has shown that, from deal to deal, serial acquirers' cumulative abnormal returns (CAR) are declining. This has been most often attributed to CEOs hubris. We question this interpretation. Our theoretical analysis shows that (i) a declining CAR from deal to deal is not sufficient to reveal the presence of hubris, (ii) if CEOs are learning, economically motivated and rational, a declining CAR from deal to deal should be observed, (iii) predictions can be derived about the impact of learning and hubris on the time between successive deals and, finally, (iv) predictions about the CAR and about the time between successive deal trends lead to testable empirical hypotheses.

Corporate serial acquisitions: An empirical test of the learning hypothesis

Recent empirical papers report a declining trend in the cumulative abnormal return (CAR) of acquirers during an M&A program. Does this necessarily imply that acquiring CEOs are infected by hubris and are not learning from previous mistakes? We first confirm the existence of this declining trend on average. However, we find a positive CAR trend for CEOs likely to be infected by hubris, which is significantly different from the negative trend found for CEOs who are more likely to be rational. We also explore the time between successive deals and find empirical evidence to suggest that many CEOs learn substantially during acquisition programs.

Legal insider trading and stock market reaction: evidence from the Netherlands

This paper provides an analysis of legal insider trading on the Euronext Amsterdam stock exchange by using data published in the register held by the AFM, the dutch financial markets authority. The sample includes 822 transactions executed by corporate insiders between the beginning of January 1999 and the end of September 2005. Our analysis shows that the financial markets' response is not significant for purchases, and that the abnormal returns associated with the sales do not have the expected sign. However, over a longer time horizon, the average cumulated abnormal returns are positive for the stocks purchased, and negative for stocks sold by insiders. This result suggests either that insiders use long-term information for their trading activities or that they are able to time the market.

Serial acquirer bidding: An empirical test of the learning hypothesis

Recent academic studies indicate that acquirers' cumulative abnormal returns (CAR) decline from deal to deal in acquisition programs. Does this pattern suggest hubristic CEO behaviors are significant enough to influence average CAR patterns during acquisition programs? An alternative explanation is CEO learning. This study therefore tests for learning using successive acquisitions of large U.S. public targets undertaken by U.S. acquirers. A dynamic framework reveals that both rational and hubristic CEOs take on average investor reactions to their previous deals into account and adjust their bidding behavior accordingly. These results are consistent with a learning hypothesis

CEO Narcissism and the Takeover Process: From Private Initiation to Deal Completion

Chief executive officer (CEO) narcissism affects the takeover process. Acquirer shareholders react less favorably to a takeover announcement when the target CEO is more narcissistic. Narcissistic acquiring CEOs negotiate faster. They are also marginally more likely to initiate deals. Acquirer CEO narcissism and target CEO narcissism are associated with a lower probability of deal completion and reduce the likelihood that the target CEO will be employed by the merged firm. Our findings highlight the importance of both acquirer and target CEO psychological characteristics throughout the takeover process

Licenciements collectifs : réaction boursière et attitude politique

Après les cas de Renault Vilvorde en 1997 et Ford Genk en 2003, la Belgique est à nouveau secouée par une annonce de licenciements collectifs dans le secteur automobile. La décision de licencier environ 4.000 travailleurs de Volkswagen Forest a suscité une vive réaction au sein de la classe politique. A l'opposé, les marchés financiers ont salué positivement le plan de restructuration de l'entreprise allemande. S'agit-il de licenciements boursiers ? Notre objectif est d'essayer de comprendre les logiques en présence.

Board reforms and M&A performance:international evidence

This research employs a difference-in-differences framework to study the impact of major board reforms on the performanceof mergers and acquisitions (M&As). Using an international sample of board reforms implemented in 61 countries from1985 to 2021, we document a drastic redistribution of wealth from target shareholders to acquirer shareholders after theboard reforms in target countries. This effect is most pronounced in M&A transactions that involve the sale of controllingshares, thereby supporting the hypothesis that corporate board reforms mitigate the private benefits of control in the targetfirm. Furthermore, these reforms increase expected deal synergies, in that deal-level announcement returns are higher afterthe implementation of the reforms. When country-level institutional quality and legal protection of shareholders are greater,it reinforces the reform effects. Overall M&A activity remains unchanged following the reforms, yet financial bidders com-plete fewer transactions, implying a reform-induced squeeze-out of financial bidders from the M&A market in the targetcountry. Collectively, these international results are consistent with the predictions of the private benefits of control theoryand underscore the role of institutional quality and investor protection in reinforcing the effects of board reforms worldwide

Serial acquirer bidding: An empirical test of the learning hypothesis

Recent academic studies indicate that acquirers' cumulative abnormal returns (CAR) decline from deal to deal in acquisition programs. Does this pattern suggest hubristic CEO behaviors are significant enough to influence average CAR patterns during acquisition programs? An alternative explanation is CEO learning. This study therefore tests for learning using successive acquisitions of large U.S. public targets undertaken by U.S. acquirers. A dynamic framework reveals that both rational and hubristic CEOs take on average investor reactions to their previous deals into account and adjust their bidding behavior accordingly. These results are consistent with a learning hypothesis

CEO Narcissism and the Takeover Process: From Private Initiation to Deal Completion

Chief executive officer (CEO) narcissism affects the takeover process. Acquirer shareholders react less favorably to a takeover announcement when the target CEO is more narcissistic. Narcissistic acquiring CEOs negotiate faster. They are also marginally more likely to initiate deals. Acquirer CEO narcissism and target CEO narcissism are associated with a lower probability of deal completion and reduce the likelihood that the target CEO will be employed by the merged firm. Our findings highlight the importance of both acquirer and target CEO psychological characteristics throughout the takeover process